Technology Executive Committee

Technology Executive Committee TEC/2015/11/12 24 August 2015 I. Background Eleventh meeting of the Technology Executive Committee AHH, Bonn, Germany 7 11 September 2015 Background note Draft TEC Brief on national systems of innovation 1. Under the enabling environments and barriers area of the 2014 2015 rolling workplan of the Technology Executive Committee (TEC), as activity 4, the TEC agreed to, inter alia, prepare a TEC Brief on national systems of innovation (NSI). 2. At Lima, COP 20 noted that the TEC held a workshop on NSI in October 2014 and requested the TEC to continue its work on enabling environments and barriers as stipulated in activity 4 of its rolling workplan. II. Scope of the note 3. This background note provides, in its annex, the TEC Brief on NSI prepared by the TEC task force on enablers and barriers. III. Possible action by the Technology Executive Committee 4. The TEC will be invited to finalize the TEC Brief on NSI. United Nations Framework Convention on Climate Change 1 of 12

Annex 1. Introduction TEC Brief Strengthening national systems of innovation to enhance action on climate change Technological change is one of the key arms in our arsenal to combat climate change. A country s capabilities that drive and enable this change thus take on a critical role. The implications of our ability to manage a climate technology transition are enormous: a recent study suggests that to keep the global rise in temperature to less than 2 C the additional costs of deploying energy technologies between 2016 and 2050 are USD 40 trillion (IEA 2015). Since developing countries may account for up to 90 per cent of energy demand growth to 2050 (IEA 2015), the importance of their technological capabilities to manage this transition effectively and efficiently cannot be overstated. A country s technological capabilities are determined in part by the effectiveness of its national systems of innovation (NSI). The NSI is the network of actors, institutional contexts and linkages that underlie national technological change. The NSI should thus play a central role in supporting country efforts to enhance action on climate change mitigation and adaptation. It also helps a country to meet other developmental challenges and add value to their national economy. A national system of innovation consists of: Actors: Organizations that participate in technology development and transfer e.g. technology firms, universities and financiers Institutional context: Norms, cultural practices and laws which shape actor efforts e.g. government policies that affect how the private sector invests in a particular sector Linkages: Interactions and relations between the actors and the institutional context e.g. flows of information and knowledge, and collaboration between firms, universities and research institutes. We, the Technology Executive Committee (TEC) of the UNFCCC, acknowledge the key role that NSIs play in combating climate change. In this TEC brief, we outline the current state of play of NSIs in developing countries. We then highlight how developing countries and the international community may work together to support these countries to strengthen their NSIs, enhancing both national climate action and sustainable development. 2. National systems of innovation in developing countries The key question of this brief is: how can we support developing countries to build their technological capabilities and enhance their climate efforts? As we note in the introduction, to strengthen technological capabilities we need to strengthen our NSIs. And to understand how together we can strengthen our NSIs, first we have to look at what needs to be strengthened: what is the current situation in developing countries? This is difficult to answer. Firstly, there is little information on the state of developing country NSIs. Most studies focus on developed countries, presumably because these countries have the greatest innovation activity and demand for such studies. There is some information on the larger developing countries (Brazil, China, India and South Africa) but little on the small and medium sized ones. Secondly, many aspects of a NSI are country specific and thus vary widely across countries. These national characteristics can have a significant influence on shaping innovation outcomes, which might be why we see countries at similar levels of economic development with different innovation landscapes and trajectories. Thirdly, the key innovation activities that a country undertakes may depend on its size and income level. For example, small and medium developing countries may be focused on incremental and adaptive innovation, while OECD countries, in addition to these activities, may also be focused on pushing the technological frontier. However, there are a range of activities that are needed for successful innovation, irrespective of national characteristics (Edquist 2011) and income level. And while innovation is not a linear process and involves change of many kinds including cultural, organizational, behavioural and technological (Stirling, 2015) we believe that there is merit in investigating NSI effectiveness by looking at activities along the traditional 2 of 12

technology cycle (research and development, demonstration, market introduction and commercialization, and diffusion). Given the limitations noted above, and the limited space of this brief, we must emphasize that we do not provide a complete picture of the state of play of country NSIs. However, in the following section we will analyse some activities that help us build a general understanding of the state of developing country NSIs. Some of these activities are broader than climate change and are economy wide. This is based on the notion that the NSI is the foundation for innovation in any technology area, including climate technologies. Economy wide innovation Innovation indices One way to estimate a country s innovation effort is to consider indices that combine the analysis of various innovation activities into one measure. A commonly cited index of innovation performance is the Global Innovation Index (GII), which contains 81 indicators that cover a variety of national innovation activities. We find that innovative capability and performance varies with income level, with developed countries being the innovation leaders (see Figure 1). Notably however, many developing countries are seen as efficient innovators with regards to their innovation output/input. These countries are high achieving relative to their gross domestic product (GDP), with similar innovation efficiency to high income countries. Figure 1: Country Global Innovation Index score vs. GDP per capita in PPP$. (Source: GII 2014) Gross expenditure on research and development To approximate the level of activity at the earlier stages of the technology cycle, we can look at gross research and development (R&D) expenditure. As with the GII, this indicator highlights the relative thinness of developing country innovation activities (Figure 2). There is a clear correlation between income level and scale of R&D effort, although there is some variation among countries with similar GDP. 3 of 12

10000 1000 R&D expenditure per capita, PPP$ 100 10 1 0.1 R² = 0.73 0 10000 20000 30000 40000 50000 60000 70000 80000 GDP per capita, PPP$ Figure 2: Gross R&D investments per capita vs. GDP per capita (Source UNESCO UIS and World Bank world development indicators) Research in universities Another indicator used to assess the state of a NSI is university research. Universities provide the skilled manpower that is needed for innovation and are also the source of new knowledge and technologies that underpin innovation. With universities being critical actors in NSIs, it is striking that their concentration within the developed countries is even more pronounced: of the 50 universities with the highest relative scientific impact across all disciplines in 2007 11, only two were from outside the Organization for Economic Co operation and Development (OECD) member states [OECD 2014]. While the large developing countries (Brazil, China and India) are engaged in international collaboration, the normalized impact of their research output is below the world average. We note that there are many other research institutions that may also play a prominent role in building NSIs, including applied research institutions. Climate innovation In terms of climate innovation, again most studies focus on OECD countries since these have traditionally undertaken most of the climate innovation activities. On developing countries, the existing studies focus only on the large developing countries. Here we look briefly at two ways of estimating NSI capacity for climate innovation. We consider innovation inputs, i.e. a country s efforts to stimulate innovation, and then also the innovation outputs and outcomes, i.e. the outcomes of these efforts. As noted previously, in this section we provide only a snap shot of some of the activities that may highlight climate innovation activity. Climate innovation inputs With regards to inputs, a country s research, development and demonstration (RD&D) is seen as a key indicator as it is expected to reflect the pipeline of new and improved technologies entering the national market. Investments in RD&D also attract and stimulate other national investments and efforts in innovation. However, there is limited data about climate mitigation RD&D in countries other than government energy RD&D (ERD&D) investment data collected by the International Energy Agency (IEA). This data can still serve as a useful measure of climate innovation activities as the energy sector is a key contributor of greenhouse emissions. It is estimated that in 2013 non IEA country government investments in ERD&D were a small fraction of the 17.3 billion purchasing power parity adjusted dollars (PPP$) invested by IEA country governments in 2013. A study examining ERD&D investments in large developing countries found that direct government investments in these countries in 2008 were about 1.4 billion PPP$ 1 (Kempner, et al., 2010). There is even less understanding of innovation inputs such as RD&D for adaptation, in part because adaptation technologies are more difficult to define (and may often be soft technologies) but also because adaptation activities are often more local than those of mitigation. Climate innovation outputs and outcomes 1 The study also found that state owned enterprises (SOEs) in these countries invested more than 12 billion PPP$ in ERD&D that same year, indicating that SOEs are an important component of the climate related NSI in developing countries (Kempner, et al., 2010). 4 of 12

In terms of innovation outputs, patents are often used as an indicator of innovation as they are noted to be an approximate measure of technological progress and activity. And there is data available on energy related patenting in large developing countries. An analysis of patenting data on climate technologies between 2000 and 2011 suggests that patents from China account for 13.7% of the global total, with India, Brazil, and South Africa each accounting for less than 1% (IEA 2013). There is little aggregated information on patenting data from small and middle sized developing countries. Additionally, we note that patents may be a less effective measure of innovation in countries where little patenting activity occurs. We also note that one of the issues in examining patent applications by country of origin is that the applications could be made by local R&D centers of multinationals (IEA 2013). With the NSI playing a key role in driving technological change, it is also interesting to observe if such change leads to a reduction in a country s carbon intensity. It can be observed that the low and middle income developing countries and the large developing countries are reducing their carbon intensity. This may be taking place by moving to low carbon energy sources as well as enhancing the energy efficiency of the economy. Only the least developed countries are experiencing an increase in carbon intensity of their economies (see Figure 3). Trends in carbon intensity for selected countries/regions (kg CO2 per 2011 PPP $ of GDP) India 0.6 0.5 0.4 0.3 0.2 0.1 0 1990 1991 Figure 3: Trends in carbon intensity of selected economies and groups (1990 2011). For China, use right hand side vertical axis. (Source: World Development Indicators data set) The overall state of play 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 In general, developing country NSIs tend to be less developed, less dynamic and much less analyzed than those of developed countries. The limited studies that exist show that the large developing countries have visible innovation related activities and outputs. China is an outlier among the developing countries in terms of the scale of its R&D investments, its ERD&D investments and its performance in both patenting as well as deployment of renewables. In fact, China is now seen as the world s largest investor in renewables (REN 2015). With China, India and other major developing countries recently making significant investments in renewable energy deployment, there needs to be a greater understanding of developing country contributions to climate innovation. On the whole, though, our understanding of NSIs in developing countries especially in relation to climate challenges remains very limited. 3. Strengthening key elements of national systems of innovation With developing country NSIs less effective than desired, what can be done to strengthen them? Strengthening NSIs is a formidable task. It involves strengthening a range of actors, enhancing the institutional context in which they are operating, and catalysing the linkages between actors and the institutional context. Importantly, the 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Japan United States World OECD Low & middle income LDCs China 5 of 12

national government (along with state and province level administrations, and even city administrations, in countries where they play an important role) is the central NSI stakeholder that leads efforts to strengthen the NSI. To achieve this, it may consider the following three complementary actions. Action 1: Start with fundamentals While countries such as the Republic of Korea stand out for transforming their NSIs in recent decades, success stories of a large scale transformation are rare. Building on this example, what are the key policy actions that successfully transform a NSI? Firstly, these countries had a strong national focus on developing foundational capabilities. Key are policies that build a strong technical higher education and training system, as this serves both as a research base and a training ground for skilled actors at the heart of the innovation system. For the institutional context, the focus is on creating a general enabling environment (e.g. creating stable macroeconomic conditions and facilitating competition and entrepreneurship) and building demand through market formation. Emphasis is also on creating an environment that encourages investment in (i) building skills and technological capability, (ii) technology adoption and (iii) innovative activity. These activities may thus catalyse the involvement of the private sector, another key actor in the innovation process. Governments also strive to ensure that institutional contexts facilitate and promote learning by various actors within NSIs. Finally, equally important is to strengthen linkages between key actors, such as those between firms, universities, research institutes, quality or productivity organizations and technology transfer or extension bodies. Ultimately, the process of developing strong indigenous innovation capabilities is a long and arduous process. It generally starts with learning to introduce and master existing and newly developed technologies and engaging in incremental innovations. Later it leads to being able to develop new to the world innovations based on new knowledge. Historically, governments have played an active and key role in driving and enabling such progress up the innovation ladder (see Box 1). Box 1 Republic of Korea: Building a dynamic national system of innovation The Republic of Korea is a prominent example of a country that has successfully built a strong and dynamic innovation system in just a few decades. In the initial stages, government policies promoted the importing and assimilation of technologies and their improvement over time by learning through manufacturing as well as reverse engineering. The policies also promoted a focus on specific industries such as steel, shipbuilding and automobiles. The government (i) introduced an export oriented strategy which ensured competition and (ii) encouraged significant investments in R&D which developed competitive national firms. Government investments in education and human resource development also supported this capability building. Notably, the government s policies evolved over time in response to the evolving perceived needs of the economy. The government s role also changed: at first it set targets and helped firms to meet these targets through suitable policies and provision of finance. Later, it became more of a facilitator and coordinator of policies and programs. (Based on Chung 2007) Action 2: Focus on specific climate technologies Strengthening NSIs broadly is an objective to aspire to for all developing countries. However, given the enormity of that task and the time scale for success, a country may consider beginning with strengthening its NSI to meet specific climate and development challenges. In this way, a country can efficiently allocate its resources to strengthen innovation system elements that are most relevant to successful implementation of its priority technological pathways in the climate arena. To strengthen its NSI using this focused approach, a country might prioritize specific sectors and technologies, and identify the stages of the technology cycle that might require most support. We note that focused NSI strengthening is somewhat nuanced and subject to the particularities of a country s climate technology choices. Even for a given technology, different actors, institutional contexts and linkages may come into play at the different stages of the technology cycle. During the research stage, actors such as universities and research labs play a central role in the technical arena and government agencies are the primary source of policy action and direction, and play the largest role in funding. The institutional context is focused on providing an environment that nourishes research, invention, experimentation and the transfer of knowledge and know how. As Box 2 highlights, the government may also undertake direct state investment to support innovation of the prioritized area, providing a base upon which private actors may later build. Linkages are centered on exchanging scientific and technical information and financing opportunities. At the development stage, the private sector becomes the key actor: they generally have the greatest incentives to collect information about how and under what conditions the technology will be used, affecting product 6 of 12

specification. Private sector entities may also engage in demonstrating the technology to test it and get user feedback. At this stage, funds from private sector entities or risk capital providers are more relevant. Important linkages here include public private partnerships, which may support the transition from applied research to technology demonstration and avoid the valley of death of the technology cycle. As the technology is commercialized, the focus shifts to establishing technology production. Efforts are made to ensure that producers and consumers successfully adopt the technology and that it is quickly and widely diffused. Private sector entities are again the central actors. However, in the case of climate technologies, governments can also be critical in defining and shaping the institutional context that creates markets and demand through appropriate policies and regulations. Different kinds of linkages come into play here, such as those between manufacturing firms, financiers, users, and governments For low income countries and least developed countries, and those at the early stages of technological development, an important area of focus will be on supporting the organizations that promote the adoption and diffusion of these technologies in high priority areas. Box 2 China: developing the wind sector At the end of 2014, China had the largest installed wind power capacity in the world, and four of the ten biggest global wind power manufacturers were Chinese. This outcome is the culmination of a sustained effort by China to develop its wind sector. The first phase, from the mid 1908s to the mid 1990s, consisted of R&D projects that encouraged national wind farms and universities to demonstrate and test the wind technology in local conditions. From the mid 1990s to the early 2000s the second phase focused on technology transfer, localization, establishment of manufacturing facilities and market exploration, with manufacturing firms becoming the central actors. The third phase focused on a significant expansion of the wind turbine market and deepening of innovation capacity, with the objective of achieving technological leapfrogging. At each stage, the government employed a suite of suitable policies to achieve the desired outcomes. (Based on Dai and Xue 2014) Action 3: Develop national strategic capabilities Finally, perhaps the most important set of capabilities are strategic and coordination capabilities (Chaudhary, Sagar, and Mathur 2012). These elements which form a key part of policy capabilities are urgently needed in developing countries to allow national and sub national (state or province level) governments to spearhead and accelerate the climate action needed. This action is focused on building the capacity of national actors so that they have the ability to develop priorities based on a country s mitigation and adaptation options and development needs. It also involves developing their ability to: (i) identify roadmaps to meet these priorities; (ii) identify the innovation gaps to be addressed for the country to successfully progress on these roadmaps; and (iii) coordinate activities across the innovation cycle. Such capabilities not only help to increase the probability of successfully undertaking actions 1 and 2; they also help to do so faster and more efficiently. Box 3 The India Bureau of Energy Efficiency (BEE): Enabling change through strategy and coordination The Indian BEE has played a central role in the recent past in enhancing energy efficiency programs in the country, with significant savings of energy and avoided generation capacity. To do so, it has taken a careful and strategic approach, identifying and prioritizing areas of highest impact through consultations with a variety of stakeholders. As a result, it began with a focus on appliances, lighting, buildings, and industry. In each area, a pathway for implementation of energy efficiency programs was identified, taking into account the gaps (e.g., availability of technology, finance, human resources and suitable policies) and actors for different stages of the technology cycle. BEE also helped coordinate various actors and activities to enable effective implementation of the programs. In that sense, it is a systems operator that is able to prioritize areas, spot key gaps, help address the gaps, and tweak the programs over time, based on learning from experiences in implementation (Based on Chaudhary, Sagar, and Mathur 2012) 4. Possible actions by key stakeholders There are two major information gaps with regards to supporting developing countries to strengthen their climate technologies NSIs. Firstly, there is a lack of understanding of the state of developing country NSIs. Secondly, our understanding of how to effectively strengthen NSIs is still limited, as is also our understanding of the scope and effectiveness of programs to support developing countries in undertaking the three key actions of NSI building. 7 of 12

Both of these gaps lead to the need to develop a more systematic assessment of good practices, experiences and lessons learned in undertaking and supporting such efforts. It is only through this assessment that we can learn what works, what doesn t and what we can improve. And the outcomes of such assessments are applicable to both the country strengthening its NSI and the actors supporting such efforts. To achieve accelerated NSI strengthening we need to do more than build the national capacity of developing countries. We also have to build the capabilities of those who support such capacity building. Table 1 outlines the key elements of NSI strengthening at each stage of the technology cycle. Domestic actors Section 3 outlined the possible actions that the national government, the central NSI actor, may undertake. Other domestic actors can contribute importantly to strengthening climate technology NSIs by better targeting their own capabilities and efforts towards climate relevant innovation. These actors e.g. private sector entities, civil society and academia can also build linkages with other actors to strengthen the country s technical, financial and policy activities. For example: (i) civil society and academia can engage in the debate on national priorities and pathways to meet climate challenges; (ii) private sector entities can develop consortia to address specific technical challenges. They can also participate in public private collaborative efforts to define national priorities, develop national strategies, undertake technology foresight exercises, and develop national action plans; (iii) government agencies and private sector entities can collaborate with finance providers to develop instruments that meet funding needs; and (iv) public agencies that support technology adoption and diffusion (such as technology extension services) can prioritize the provision of relevant information, advice and support for the diffusion of useful existing and newly developed climate technologies. International actors International actors can play an important role in complementing, catalyzing and accelerating national efforts on strengthening NSIs. These actors may include: national governments, international organizations, bilateral and multilateral agencies, R&D agencies, private sector entities, philanthropies, non governmental organizations and civil society. International collaboration may take many forms, including strategic alliances, foreign direct investment, formal joint ventures, contracts, trade, joint development of technology and licensing (Gallagher, 2014). It should be noted that there are a number of on going activities undertaken by international public actors to support climate NSI strengthening, a few of which are outlined in the box below. These actors can contribute in many different ways, including by strengthening: Technical aspects of NSIs, by collaborating on scientific, engineering and other technical research and development, and facilitating the transfer of knowledge and know how Financial aspects of NSIs, by providing finance to undertake technology demonstration and deployment and help overcome other barriers to innovation, e.g., through risk mitigation for early adopters. They can also provide financial support to help build linkages between domestic and international actors Policy and business model design and development, by providing advisory services or developing goodpractice approaches Local capacity of actors, especially in the least developed countries, by training engineers and scientists, entrepreneurs, financial actors (in risk evaluation and financing of climate technology projects), technology extension services and policy makers Box 4 International efforts to strengthen national systems of innovation Incubating climate technologies. The Kenyan Climate Innovation Centre (CIC) is the first of a series of CICs being set up by a World Bank infodev initiative in partnership with Denmark and the United Kingdom of Great Britain and Northern Ireland. The CICs aim to support climate innovation in developing countries by providing seed financing, network linkages, technical facilities, business training and support for the design of specialized policy interventions. The Kenyan CIC was seeded with a contribution of USD 15 million in Nairobi, Kenya in 2012 and focuses on three priority areas: water management; agribusiness; and renewable energy. Key activities undertaken by this CIC are services to help entrepreneurs accelerate their businesses; financing designed to meet business needs across their growth cycle; market intelligence, matchmaking, and policy advisory and advocacy. 8 of 12

Table 1: Key elements for strengthening the national system of innovation Source: Ambuj Sagar Technology stage Cross cutting: Strategic analysis and coordination Basic and applied research Technology development/adaptation (including demonstration) Market focused product and delivery model development/adaptation Commercialization Large scale diffusion Focus of national system of innovation strengthening National level activities Develop priorities based on mitigation and adaptation options, Identify needs, local capabilities and resources Identify implementation pathways and innovation gaps Coordinate activities across innovation cycle Identify strategic and coordination agency Build scientific research capabilities Provide domestic R&D funding Support higher education and skills training Encourage experimentation Build scientific, engineering, and design capabilities Understand users and markets and the linkages between the two Provide financial and technical support for: Technology adaptation Product development and demonstration Build manufacturing capability Create early markets Mitigate risk for early adopters Provide finance for scale up of manufacturing Mitigate risk of early adopters Refine the business model Encourage large scale deployment Develop policy review and feedback systems Support diffusion Create demand International activities Analyse climate and development opportunities Analyse technology options landscapes, and local capability Support implementation pathway design Identify innovation gaps Support scientific research collaborations Train human resources Collaborate in joint technology development/adaptation Provide financial and technical support for product demonstration, user feedback and design Provide support for manufacturers Provide technical support for financial institutions and policy makers for market and riskmitigationinstrument design Share good practices Provide technical support for policy makers Share good practices United Nations Framework Convention on Climate Change 9 of 12

5. Possible actions by the Technology Mechanism The Technology Mechanism can play an important role in strengthening NSIs in developing countries to support and accelerate their efforts to address climate challenges. The Technology Mechanism could: Overarching Undertake analytical studies that deepen the understanding of the state of developing country NSIs with regards to climate innovation Prepare case studies and synthesize experiences from developing countries to help identify the challenges, good practices and lessons learned in strengthening NSIs with regards to climate innovation and executing climate technology implementation plans Communicate and share key findings, good practices and lessons learned to the COP and other key stakeholders Support developing countries to build their national systems of innovation with regards to climate innovation in a way which facilitates technology leap frogging (use of new technologies) and takes in to account national priorities and development plans Support the strengthening of developing country NSIs, in accordance with decision 1/CP.16, paragraph 123 (c)(ii) Encourage developing countries to consider how to strengthen their NSI when they undertake technology needs assessments and formulate technology action plans (TAPs), and involve their NDE in developing and implementing their TAPs Actors Support developing countries to identify national priorities and implementation pathways for climate technology development/transfer and deployment. These actions will support the country to identify relevant actors and innovation gaps that need to be addressed. This process may be assisted by supporting and encouraging developing countries to undertake technology needs assessments (TNAs) and prepare technology action plans. While TNAs have not focused specifically on NSI building, they play a key role in building the capacity of national actors to determine a country s climate technology priorities Support the strengthening of relevant local actors by supporting: human resource training; development of technical infrastructure; implementation of good practices; and collaborations and partnerships with international counterparts Support the building of national analytical capabilities of NSIs actors with regards to climate innovation Encourage developing countries Parties to consider the importance of strengthening their NSI, including their NDE, when submitting requests to the CTCN Invite developed countries Parties to highlight to the CTCN, through their NDE, how they could support developing countries to strengthen their NSI, with the aim of facilitating the identification of requests to the CTCN on NSI issues. Developed countries could be invited to list relevant national level: o o o o Areas of expertise Private sector actors Research institutions Development cooperation agencies Institutional context Linkages Support the design and implementation of policies which facilitate the implementation of national climate technology plans, including by: o Holding stakeholder workshops o Facilitating the sharing of experiences, lessons learned and good practices o Providing policy recommendations Support the development of strategic niche climate technology markets Building on good practices and lessons learned, undertake focused activities (such as workshops, forums or webinars) to promote the strengthening of linkages and collaboration between actors at the local, national and international levels Support the creation or strengthening of geographical innovation clusters 10 of 12

6. Highlights A national system of innovation (NSI) plays a central role in supporting countries to efficiently and effectively stimulate technological change in response to climate change. It also supports them to achieve their sustainable development objectives. To accelerate global climate efforts, there is a need to support developing countries in strengthening their NSI. Effective and efficient NSIs are a precondition to enhanced developing country capacity to absorb new technologies, adapt them to their needs, and implement and maintain them. This will also support continued technological development and adaptation to regional needs. Strengthening NSIs requires three key complementary actions: 1. Develop the fundamental elements: (i) build a strong education system, (ii) invest in RD&D and (iii) implement enabling policies (including to support market creation) 2. Focus on specific climate technologies that help meet national climate and development priorities 3. Build strategic and coordination capabilities of national actors There is a need to conduct further analysis on the state of NSIs in developing countries. The Technology Mechanism and key stakeholders are encouraged to play significant roles in developing an enhanced understanding of the state of play of the NSI of developing countries. There is the need to enhance understanding on the effectiveness of initiatives supporting the strengthening of developing country NSIs. The Technology Mechanism and other key stakeholders are encouraged to enhance efforts to share experiences, good practices and lessons learned. Developing countries are encouraged to consider the importance of strengthening their country s NSI, including their NDE, when submitting requests to the CTCN. Developed countries are encouraged to highlight to the CTCN, through their NDE, how they could support developing countries to strengthen their NSIs, with the aim of facilitating the identification of requests to the CTCN on NSI issues. Developing countries are encouraged to consider how to strengthen their NSI when they undertake a TNA and formulate technology action plans, and involve their NDE in developing and implementing their TAPs. 7. Way forward With a concerted national strategy, sustained policy efforts at the national level and effective international support, a developing country can strengthen its NSI. This will first and foremost require actions by the national government. However, international support can play an important role in helping to strengthen a NSI by drawing on wide ranging experiences and expertise. Given the time that may be required to strengthen NSIs broadly, it may be useful to focus on national and international actions that can help accelerate prioritized climate innovation. To do so, a focused approach should be taken that emerges from identified climate priorities and implementation pathways and focuses on supporting the strengthening of specific NSI elements. In addition to learning from programs that aim to strengthen NSIs, greater efforts to build the science, technology and innovation capabilities of developing countries are critical to accelerating their climate actions. 11 of 12

References Chaudhary A, Sagar AD, and Mathur A. 2012. Innovating for energy efficiency: a perspective from India. Innovation and Development. 2(1): pp. 45 66. Chung S. 2007. Excelsior: the Korean innovation story. Issues in Science and Technology. 24(1): pp.62 69. Dai Y and Xue L. 2015. China's policy initiatives for the development of wind energy technology. Climate Policy. 15(1): pp.30 57. Edquist C. 2011. Design of innovation policy through diagnostic analysis: identification of systemic problems (or failures). Industrial and Corporate Change. 20 (6): pp.1725 1753. Gallagher K. 2014. The globalization of clean energy technology: lessons from China. Massachusetts: Massachusetts Institute of Technology. GEA, 2012. Global Energy Assessment Toward a Sustainable Future, Cambridge and Laxenburg: Cambridge University Press and the International Institute for Applied Systems Analysis. Global Innovation Index. 2014. The Global Innovation Index 2014: The Human Factor In Innovation. Ithaca, Fontainebleau, and Geneva: Cornell University, INSEAD, and WIPO. IEA. 2013. Tracking Clean Energy Progress 2013, Paris: IEA and the OECD. IEA. 2015. Energy Technology Perspectives 2015, Paris: IEA and the OECD. OECD. 1997. National Innovation Systems. Paris: OECD. OECD. 2014. Science, Technology, and Industry Outlook 2014. Paris: OECD. REN21. 2015. Renewable 2015: Global Status Report. Paris: Renewable Energy Network 21. Stirling A. 2015. Towards innovation democracy? Participation, responsibility and precaution in the politics of science and technology. STEPS Working Paper 78. Brighton: STEPS Centre. Contact Details The Technology Executive Committee may be contacted through the United Nations Climate Change Secretariat (UNFCCC): Platz der Vereinten Nationen 1, 53113 Bonn, Germany E mail: tec@unfccc.int Website: www.unfccc.int/ttclear/tec About the Technology Executive Committee The Technology Executive Committee (TEC) is the policy component of the Technology Mechanism, which was established by the Conference of the Parties in 2010 to facilitate the implementation of enhanced action on climate technology development and transfer. Along with the other component of the Technology Mechanism, the Climate Technology Centre and Network, the TEC is mandated to facilitate the effective implementation of the Technology Mechanism. 12 of 12